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1.         I.            Background Information

 

IBOPE AGB Mexico

IBOPE AGB Mexico is the Mexican ratings measurement company and has 20 years of experience measuring television ratings in the Mexican market. Its partners include two of the most noteworthy international measurement companies, IBOPE Brazil and AGB Nielsen.

 

IBOPE AGB Mexico plays a very important role in the Mexican television and advertising industry because the metrics published by IBOPE AGB Mexico are the benchmark used by advertisers to allocate their advertising investment. In Mexico, it is estimated that approximately $2,700 million dollars is invested in television advertising. Hence the importance for the industry that these metrics be established by means of an objective and transparent process that is free of political and economic influences.

 

IBOPE AGB Mexico, like other TV measurement services in other markets, creates an annual “Establishment Survey” (ES). In Mexico, this study is conducted based on surveys in 10,000 homes and in 28 cities in order to evaluate key market trends. These trends are used as a basis to make the necessary adjustments to the sample so that it can be updated based on the most recent habits and characteristics of Mexican households. 

                Media Research Committee (CIM - Consejo de Investigación de Medios)

The Media Research Committee (CIM) is the Mexican organization responsible for monitoring the quality of research services. The Committee’s current Executive President is Martha Castellanos. This organization is governed by a Board of Directors consisting of 12 officers, 4 of which are advertisers, 4 are media agencies and 4 are media representatives.

 

The Board of Directors is currently comprised as follows:

 

Agencies

Havas Media – Archie Deneken

MindShare – Lilia Barroso

Starcom – Jorge Anaya

Carat – Miguel Loret

 

Advertisers

Grupo Bimbo – Norma Martell

Nestlé – Francisco J. García Piña G.

Pepsico – Frans Waller

P&G – Daniela Guerra

 

Media

Grupo Radio Centro – Gonzalo Yáñez

TV Azteca – Idalia Cruz

Televisa Radio – Jorge Hoyos

Vendor – Alejandro Flores

 

 

The Media Research Committee (CIM) uses several resources to evaluate the work conducted by IBOPE AGB Mexico, the main one being the guidelines established by the Media Ratings Council (MRC). IBOPE AGB Mexico conducts the Establishment Survey (ES) according to the standards established by the MRC, and then Ernst & Young audits the ES and other operational aspects of IBOPE AGB Mexico. In addition to this, the MRC evaluates IBOPE AGB Mexico’s service and provides recommendations for improvement.

 

During the first half of 2010, like every year, IBOPE AGB Mexico conducted its Establishment Survey (ES) following the usual parameters. After completing its field work, it shared its findings with the CIM in October 2010. The CIM did not authorize the publication of the results of the 2010 ES. Because of this, the market continues to use a sample based on the ES that was prepared in the first half of 2009.

 

IBOPE AGB Mexico is currently conducting the 2011 ES which should be published within the next few weeks. The findings of this new ES will be used as a reference to adjust the ratings that the market will use in 2012. Despite the imminent completion of this data, it is highly unlikely that the market will have access to these results because to this date, the CIM still has not authorized the results of the 2010 ES.

 

Because of this, the current ratings that the markets are using are considerably outdated. From the time the 2009 ES was conducted until today’s date, it is estimated that there has been a 48% increase in the number of homes with pay TV. Today, LAMAC (Latin American Multichannel Advertising Council) estimates that 42.99% of Mexican households have pay TV. Nevertheless, IBOPE’s ratings are based on the supposition that only 32.2% of these households have pay TV.

 

The following pages of this document will show how the use of outdated data results in an unrealistic distortion of the audience of pay TV channels since due to the growth in the number of homes with pay TV, the audience indicators for this media have grown considerably.

 

1.       II.            Why hasn’t publication of the data from the 2010 Establishment Survey been authorized?

 

The CIM is the official representative of the industry’s three sectors: media, media agencies and advertisers. In principle, the CIM is supposed to look after the interests of all members of the industry. However, due to the way the CIM’s statutes were established, the decision-making power is in the hands of 12 people. Because of the way the current statutes are written, the democratic process has been completely eliminated.  

 

This is the reason why the publication of the 2010 ES has not been approved. The majority of the CIM’s Board of Directors agrees that the data needs to be updated. However, some members of the Board have opposed the publication of these results because the data will affect them.

 

The structure currently regulating the CIM makes decision-making very complex. The CIM has allowed a minority to block the interests of the majority and is therefore not adequately representing the needs of the industry. This is happening despite the fact that the data was obtained following methods pre-authorized by all members as well as following the standards of the MRC. This way of handling the decision-making process is entirely detrimental to the industry as a whole.

 

The CIM has asked IBOPE AGB Mexico to publish the impact of the ratings prior to the official publication of the ES. This violates the standards of the MRC because it allows prior access to the information and members of the CIM could evaluate it according to how these results would affect their businesses, making it less probable for them to approve an update of universes. This is because they would realize that based on the results of the ES, the ratings of their media are decreasing while those of other media are increasing. This is why the CIM’s decision-making process is not 100% free of political and economic pressure.

 

A minority of CIM’s members has formally communicated a series of concerns that they have with regard to IBOPE AG Mexico’s 2010 ES. Without intending to discredit the importance of those observations, the approval and publication of the ES should not be delayed because the ES procedure and questionnaire were pre-approved by the CIM’s Board of Directors.

 

From LAMAC’s point of view, the same opinion shared by the CIM, there is no evidence that the 2010 ES was poorly conducted. It is inappropriate to introduce arguments foreign to the process in order to look for excuses that only delay its publication. The CIM’s number one priority should be to assure that the updated data is published at the indicated time. This is CIM’s obligation to the industry.

 

In case there is still any doubt, then an audit should be ordered immediately. After this audit is complete, the correct thing to do would be to evaluate the suggestions of those members who have concerns and then make the appropriate changes to the current design. These suggestions must be considered without political and economic pressure. The decisions made by the CIM’s Board must be in the industry’s best interest.

 

1.     III.            Why do we think that the CIM should authorize the publication of the 2010 Establishment Survey?

 

• Because the market changed drastically and the ratings based on 2009 do not reflect  reality.
• Because the advertising industry depends on objective and updated ratings.
• Because IBOPE AGB Mexico adhered to the standards of the MRC and received approval from the CIM. The protocol was pre-approved.
• Because IBOPE AGB Mexico is willing to conduct an audit in order to determine, as in other years, that it did indeed comply with the established standards to conduct the 2010 ES. Despite the fact that the vast majority of the CIM’s members supported the idea of conducting an audit, this authority was unable to get the minority that is questioning the results to support this study in order to eliminate any doubt.
• The vast majority of the CIM’s members support the publication of the results of the 2010 ES.
• The MRC recommended the publication of the data corresponding to the 2010 ES on three occasions.

 

1.     IV.            LAMAC Statistical Projections

Why did we do it?

The market is about to plan the 2012 advertising investment and therefore, the market needs to know the truth about the figures it uses to plan its media purchases. That is why LAMAC decided to conduct an estimate based on historic growth and maintaining the growth rate that pay TV has had in recent years.

For this purpose, we contracted the services of Gerardo Mora, a statistician with more than 12 years of experience in media research (for more information, see his biography in the annex section), in order to develop the time series analysis, a scientifically proven and widely-used method to conduct projections in different areas such as the economy and/or demographics, among others (see the Theories and Methods section in the annex) and to meticulously project TV audiences in various target segments with the utmost methodological and statistical rigor. The following are the corresponding results.

Our intent for this data is that it be used as a temporary reference until the CIM authorizes the publication of the updated ratings produced by IBOPE AGB Mexico. Once the 2011 data is released with the 2010 ES, we recommend that the publication of the results of the 2011 ES be immediately approved.

 

Statistical Projections

The following are the most relevant results obtained from these audience projections:

 

The annual average rating % of free-to-air TV will reduce by 3% from 2008 to 2011 and the average annual rating of pay TV will increase by 42% during that same period:

2008 to 2010 Source: IBOPE AGB Mexico, Base 3 Domains, annual average rating, 6:00 a.m. to 12:00 a.m., Monday to Sunday, Target: all persons. Pay TV includes all paid TV channels. Free-to-Air TV includes channels 2, 5, 7, 9 and 13. 2011 Source: LAMAC estimates.

The average annual audience share (Share %) of free-to-air TV will reduce by 7% while the average annual audience share of pay TV will increase by 36% from 2008 to 2011:

 

2008 to 2010 Source: IBOPE AGB Mexico, Base 3 Domains, annual average rating, 6:00 a.m. to 12:00 a.m., Monday to Sunday, Target: all persons. Pay TV includes all paid TV channels. Free-to-Air TV includes channels 2, 5, 7, 9 and 13. 2011. Share calculated manually based on rating % . 2011 Source: LAMAC estimates.

And if this is going to happen in the entire study universe (individuals age 4 or more), it is natural to expect that in those segments of the population with the greatest propensity to purchase Pay TV (because they have a greater purchasing power or greater affinity for more directed programming) the change will be even more dramatic. The following results are a clear reflection of the information expressed here. The following table shows, under the target column, that for individuals in the 13-18 ABC+C target, the rating increases 54% and the share increases 36%. The target Housewives 25-45 ABC+C shows a growth rate of 41%, while its share increases to 53%.

 

The most important conclusion is that, without a doubt and independent of the bases of the information or the margins of error associated with any estimate, Mexicans will watch more and more pay TV. In other words, the audience share of pay TV will continue increasing every day as the penetration of cable systems, and especially satellite systems, maintain their current growth rate. It is obvious that this growth will have an upper limit, but it is also clear that this limit will not be reached in the near future given that the democratization in the use of cable TV occurred only recently. LAMAC estimates that by the end of 2011, 44.8% of the population will have one of these systems in their home..

The Penetration of Pay TV Grows 45% from 2011 to 2008

2008 and 2009 Source: IBOPE AGB Mexico Universes. 2010-2011 Source: LAMAC estimates

 

 

1.       V.            How do we correct this situation in the future?

 

• CIM’s statutes have to be renegotiated in order to assure that membership on the Board of Directors is open to all users of the services: media, advertisers and media agencies.
• Membership and the Board of Directors of the CIM must be open to any data user.
• The CIM’s Board of Directors must advocate that each member have a vote and that this vote be counted individually.
• The decisions of the CIM must be made democratically, where 51% of the votes are considered decisive.
• The nomination and election of the CIM’s Board of Directors must be conducted in a manner that is open and transparent to all members of this organization.
• The CIM must endorse the standards of the MRC and agree to conduct an annual audit of the results of the ES prepared by IBOPE AGB Mexico.
• The CIM must foster the implementation of improvements in the measurement studies.
• The CIM must agree that strategic decisions must be made in compliance with the standards and suggestions of the MRC.
• The CIM must agree to consider the annual updates of the samples as fundamental and perhaps propose that future updates be made more frequently, always following the standards of the MRC.
• The CIM must agree that making decisions to update the universes must be based on the interest in having updated figures for the market to use, rather than based on the impact that the ratings may suffer from year to year. 

 

1.     VI.            Annex

 

1. a.      What is LAMAC?

LAMAC is the Latin American Multichannel Advertising Council, a non-profit association established and financed by 40 cable television channels.

Its purpose is to promote multichannel advertising investments (cable, MMDS and DTH) in Latin America, systematically overcoming the obstacles of the industry through the development of definitive resources that will be used to measure the presence and effectiveness of advertising; creating communication platforms that advocate for a fair distribution of the advertising investment.

 

1. b.      What is the CIM[1]?

The Media Research Committee (CIM) is a Mexican civil association that unites all entities of the media and communication sector interested in the research, promotion and growth of this branch in the country.

Mission

To regulate the practices, the development and the growth of media and communication research in Mexico in order to be more consistent in the quantitative and qualitative evaluation of the various communication platforms.

Vision

To be the leading organization of the communication industry in Mexico that defines, standardizes, approves and implements media research and measurement standards in order to promote the continual growth of the industry and its environment.

 

1. c.       What is IBOPE[2]?

IBOPE AGB Mexico is the leading knowledge generation and measurement group regarding communication media audiences in Mexico, with more than 20 years of experience and recognized prestige. This company belongs to the IBOPE International – AGB Nielsen Media Research network with a presence in more than 40 countries.

IBOPE AGB Mexico is the benchmark for information about investments in advertising media conducted by the government, advertisers, media and advertising agencies in the country. It is an important source for making decisions regarding the strategic planning of advertising campaigns in electronic, print and foreign media. In addition, it is useful for verifying the advertising activity of advertisers and their competition. It also offers a service to monitor advertising performance in electronic and print media as well as integrated television advertising.

This organization, under the leadership of Dr. Rubén Jara, is regularly audited by Ernst & Young, and has consistently proven that it adheres to the guidelines of the MRC and that it provides true and reliable information, which is indispensable for the advertising industry in Mexico.

 

 

1. d.      What is the MRC[3]?

 

The Media Rating Council (MRC) is an organization financed by industry players. The Council’s purpose is to improve the quality of audience measurement provided by ratings measurement services and provide a better understanding of the applications (and limitation) of the ratings.

The statues of the MRC document the organization’s mission as: “to guarantee that the media industry and related users have measurement services that are valid, reliable and effective in order to develop and determine minimum ethical information criteria for media audience measurement and to provide and administer an auditing system in order to inform users whether or not the audience measurements were taken according to the established criteria and procedures."

MRC’s activities include:

• The establishment and administration of minimum standards for ratings measurements;
• The accreditation of rating services based on the information presented by said services; and
• Independent audits, conducted by consulting firms, of the activities conducted by qualification services.

 

MRC Membership

Membership is open to any communication media that depends on or uses information based on media research studies, and each member company has the right to occupy one seat on the MRC’s Board of Directors. Organizations such as Nielsen or Arbitron that provide ratings information are not permitted to be members. Currently, there are a total of approximately 95 members on the Board, representing television, radio, cable television, print media, the Internet and advertising agencies, as well as advertising organizations and commercial associations.  

The MRC also maintains an official liaison with the American Association of Advertising Agencies (AAAA), the Advertising Research Foundation (ARF) and the Association of National Advertisers(ANA).

 

MRC Members:

4A's	MediaCom
A&E Television	Mediaedge:cia
ABC Network	MediaVest
ABC Owned TV Stations	Meredith Broadcasting
Allbritton Communications	Meredith Corporation
American Urban Radio Networks	Microsoft
ANA	MindShare
Anheuser-Busch	MSNBC
AOL	MTV Networks
Association of Hispanic Advertising Agencies	NAB–Radio
AT&T	NAB–Television
Atlas	National Cable Communications (NCC)
Barrington Broadcasting	National CineMedia
Belo Corporation	National Public Radio (NPR)
Big Shoes Productions	NBC Cable
Bonneville International Corp.	NBC–Networks
Cable Advertising Bureau (CAB)	NBC–Stations
Carat North America	New Jersey Broadcasters Association (NJBA)
CBS	New York Times
CBS Interactive	Newspaper Association of America (NAA)
CBS Radio	Ole' Communications
CBS Television Stations	OMD
Clear Channel	PARADE
Comcast Networks	PBS
Comcast Spotlight Inc.	Pfizer
Condé Nast	PHD USA
Cox Media Group	Post–Newsweek
Cox Reps	Premiere Radio
CW Television Network	Press Communications
Dial Global	Procter & Gamble
Discovery	Radio Advertising Bureau (RAB)
Disney	Radio One
Dispatch Printing	Radio Research Consortium (RRC)
DRAFTFCB	Rainbow Advertising Sales Corporation
Emmis Communications	Rainbow Media
ESPN	Raycom Media
ESPN Digital	Saga Communications
E.W. Scripps	Scripps Networks
Facebook	Sony Pictures Television
Fisher Communications	Starcom
Forbes	Sunbeam Television Corporation
FOX Broadcasting	TargetCast
FOX News	Telefutura Network
FOX Sports	Telemundo
FOX Television Stations	Televisa
Galavision Cable Networks	Television Advertising Bureau (TVB)
Gannett Broadcasting	Time Warner
Google - Doubleclick	Time Warner Cable
GSN	Tribune Broadcasting
Hachette Filipacchi Magazines	Turner Broadcasting
Hearst Television	TV Azteca
Hearst Publications	United Stations
Horizon Media	Universal McCann
Inner City Broadcasting	Univision
Interactive Advertising Bureau (IAB)	Univision Online
Initiative Media	Univision Radio
LAMAC	USA Weekend
Lifetime Television	Wall Street Journal
LIN Media	WAPA TV/Televicentro of P.R.
Lincoln Financial Media	The Weather Channel
Magazine Publishers of America (MPA)	Yahoo!
MAGNA Global	YuMe
Media General	Zenith Media
Media Management, Inc. (MMI)

 

 

1. e.       Biography of Gerardo Mora

Gerardo Mora is an executive with broad experience in the analysis of audience measurement studies and has occupied high-level positions at major media agencies in Mexico. Mora studied Actuarial Science at the Faculty of Sciences of UNAM (the National Autonomous University of Mexico that has the best reputation in all of Latin America) and later specialized in the improvement and redesign of Total Quality processes. Therefore, Mora has the necessary and sufficient knowledge to prepare the above-mentioned time series analysis.

 

His incursion into marketing and communication media began in 1998 when he joined the Research Department of Media Planning, one of the country’s largest media agencies. His growth since then has been staggering and he has been able to easily progress in this industry. Among other projects, he worked on the development of systems for the use and optimization of audiences from different media, including TV, which allowed him to obtain in-depth information and experience, justifying his recruitment for this project and, even more important, his proven impartiality and honesty were two additional factors that LAMAC considered.

 

1. f.        Theory and Methods of the Statistical Projections

 

The focus of the time series analysis (understood as a set of data recorded chronologically) that is presented and used here is the one suggested by Box and Jenkins, whose book appeared for the first time in 1970, so that the presentation level of this technique will be elementary. The fundamental idea of the proposed focus lies in the strategy that Box and Jenkins propose to build models which must not only be suitable for representing the behavior of the observed data (in this case, the audience levels obtained in IAM’s TV ratings study), but their election must be suggested by this same data. This contrasts with the focus that simply attempts to search for the best adjustment of pre-conceived models to the data in question, or in this case, the TV ratings.

 

Therefore, the strategy that we have followed and that has allowed us to build the models, consisted of the following steps:

 

1. Identification of the model. Based on information from previously observed data regarding TV ratings, we identified a possible model within the class of ARIMA (autoregressive integrated moving average) models, a family of models created from both purely statistical considerations in order to consider the randomness of the phenomena in question (in this case, the habits of TV exposure) as well as purely deterministic dynamic models that appeared within the area of discrete mathematics and which are known as differential equations.
2. Estimate of parameters implicit in the model. The ARIMA models can be built from an observed time series and for this purpose, they must be characterized by means of statistics that are relatively easy to calculate (in our case, we used the most efficient non-linear estimation technique through the S-Plus statistic package).
3. Verification of suppositions. In order for the results derived from each model to be considered valid, we focused on the construction of time series models that show periodic effects of the type associated with seasonality (as happens with TV ratings) and we verified that: a) the model provides an adequate adjustment and b) that the basic suppositions, implicit in the model, are satisfactory; if they do not comply with the supposition, we determined the necessary modifications and indeed, the previous stages were repeated until the verification provided acceptable results.
4. Use of the model: the primary purpose for building the ARIMA models was to forecast TV audiences. These projections are developed using the method of maximum probability.

 

The construction of models according to the Box and Jenkins technique is an interactive process that can be represented graphically using the following diagram: